Income Taxes

12 Months Ended

Nov. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Total income taxes were allocated as follows (in thousands):

	Year Ended November 30,
	2020		2019		2018
Income tax expense	$	302,748	$	80,284	$	250,650

The provision for income tax expense consists of the following components (in thousands):

	Year Ended November 30,
	2020		2019		2018
Current:
U.S. Federal	$	213,274	$	50,970	$	106,761
U.S. state and local	35,317		(3,641)		7,485
Foreign	71,898		10,923		10,139
Total current	320,489		58,252		124,385
Deferred:
U.S. Federal	(30,190)		19,973		131,233
U.S. state and local	(96)		5,768		975
Foreign	12,545		(3,709)		(5,943)
Total deferred	(17,741)		22,032		126,265
Total income tax expense	$	302,748	$	80,284	$	250,650

The following table presents the U.S. and non-U.S. components of income before income tax expense (in thousands):

	Year Ended November 30,
	2020		2019		2018
U.S.	$	888,639	$	313,349	$	370,600
Non-U.S. (1)	288,815		11,320		39,067
Income before income tax expense	$	1,177,454	$	324,669	$	409,667

(1)For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S.

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rates of 21.0% for the years ended November 30, 2020 and 2019 and 22.2% for the year ended November 30, 2018 to earnings before income taxes as a result of the following (dollars in thousands):

	Year Ended November 30,
	2020				2019				2018
	Amount		Percent		Amount		Percent		Amount		Percent
Computed expected income taxes	$	247,265	21.0	%	$	68,181	21.0	%	$	90,945	22.2	%	(1)
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of Federal income tax benefit	50,923		4.3		11,638		3.6		20,419		5.0
International operations (including foreign rate differential)	13,168		1.1		4,518		1.4		2,258		0.6
Tax exempt income	(227)		—		(634)		(0.2)		(2,202)		(0.5)
Foreign tax credits, net	(8,654)		(0.7)		(1,664)		(0.5)		(8,006)		(2.0)
Meals and entertainment	1,822		0.2		3,641		1.1		4,528		1.1
Non-deductible executive compensation	8,407		0.7		3,720		1.1		3,011		0.7
Change in unrecognized tax benefits related to prior years	(9,314)		(0.8)		(7,690)		(2.4)		(18,497)		(4.5)
Deferred tax asset remeasurement related to the Tax Act	—		—		—		—		112,733		27.5
Transition tax on foreign earnings related to the Tax Act	—		—		139		0.1		52,417		12.8
Other, net	(642)		(0.1)		(1,565)		(0.5)		(6,956)		(1.7)
Total income tax expense	$	302,748	25.7	%	$	80,284	24.7	%	$	250,650	61.2	%

(1)On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act, which reduced the U.S. federal corporate tax rate from 35.0% to 21.0%, as well as other changes. The statutory U.S. federal corporate tax rate for companies with a fiscal year end of November 30, 2018 is a blended rate of 22.2%, which was reduced to 21.0% in fiscal 2019 and thereafter.

The following table presents a reconciliation of gross unrecognized tax benefits (in thousands):

	Year Ended November 30,
	2020		2019		2018
Balance at beginning of period	$	125,607	$	125,626	$	129,544
Increases based on tax positions related to the current period	40,209		8,142		19,840
Increases based on tax positions related to prior periods	5,275		1,399		5,002
Decreases based on tax positions related to prior periods	(2,444)		(9,560)		(28,760)
Balance at end of period	$	168,647	$	125,607	$	125,626

The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effective tax rate was $133.9 million and $99.5 million (net of benefits of taxes) at November 30, 2020 and 2019, respectively.

We recognize interest accrued related to unrecognized tax benefits in Interest expense. Penalties, if any, are recognized in Other expenses in our Consolidated Statements of Earnings. Net interest expense related to unrecognized tax benefits was $9.8 million, $6.3 million and $1.0 million for the years ended November 30, 2020, 2019 and 2018, respectively. At November 30, 2020 and 2019, we had interest accrued of approximately $65.4 million and $55.6 million, respectively, included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition. No material penalties were accrued for the years ended November 30, 2020 and 2019.

The cumulative tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):

	November 30,
	2020		2019
Deferred tax assets:
Compensation and benefits	$	238,154	$	223,357
Operating lease liabilities	140,742		—
Long-term debt	41,934		33,097
Accrued expenses and other	61,247		71,993
Net operating losses	2,534		5,634
Sub-total	484,611		334,081
Valuation allowance	(3,201)		(3,228)
Total deferred tax assets	481,410		330,853
Deferred tax liabilities:
Operating lease right-of-use assets	134,638		—
Amortization of intangibles	67,663		70,373
Partnerships	28,249		49,853
Other	15,167		12,580
Total deferred tax liabilities	245,717		132,806
Net deferred tax asset, included in Other assets	$	235,693	$	198,047

The valuation allowance represents the portion of our deferred tax assets for which it is more likely than not that the benefit of such items will not be realized. We believe that the realization of the net deferred tax asset of $235.7 million at November 30, 2020 is more likely than not based on expectations of future taxable income in the jurisdictions in which we operate.

At November 30, 2020, we had gross net operating loss carryforwards of $2.5 million, primarily related to various European jurisdictions. A deferred tax asset of $1.8 million related to net operating losses in Europe has been partially offset by a valuation allowance of $1.4 million, while $0.6 million of a deferred tax asset related to net operating losses in Asia has been partially offset by a valuation allowance of allowance of $0.3 million. The remaining valuation allowance is attributable to deferred tax assets related to compensation and benefits in the U.K.

We have a tax sharing agreement between us and Jefferies. Refer to Note 21, Related Party Transactions, herein, for further information.

We are currently under examination by a number of taxing jurisdictions. We do not expect that resolution of these examinations will have a material effect on our consolidated financial position, but could have a material impact on the consolidated results of operations for the period in which resolution occurs. It is reasonably possible that, within the next twelve months, statutes of limitation will expire which would have the effect of reducing the balance of unrecognized tax benefits by $6.2 million.

The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we operate:

Jurisdiction	Tax Year
United States	2017
New Jersey	2010
New York State	2001
New York City	2006
United Kingdom	2019
Italy	2012
Hong Kong	2014
India	2010

The new tax on global intangible low-taxed income (“GILTI”), became applicable in fiscal 2019. As a result, we made an accounting policy election in the first quarter of 2019 to treat GILTI as a period cost if and when incurred.